When a company is wound up, a liquidator is responsible for evaluating the competing claims of creditors in accordance with the priority regime.  

Claims in relation to secured property are often highly complex. There are usually numerous, competing claims.  

Often, there are insufficient assets to pay all secured creditors.  

The priority regime  

Secured creditors and the PPSR

A secured creditor has a security interest over assets owned by an individual or an entity. The Personal Property Securities Register (PPSR) is the official database for security held over certain personal property. 

The following case study highlights the importance of registration and demonstrates how secured creditor claims over personal property are evaluated during a liquidation.  

 Case study: Liquid Logistics Pty Ltd  

  1. Liquid Logistics acquired a loan of working capital from Best Bank for $250,000. Best Bank registers a general security interest on the PPSR over all Liquid Logistics’ assets.  
  1. 5 weeks later, Liquid Logistics acquires 5 trucks from Awesome Automobiles. Awesome Automobiles funds the acquisition of the trucks and registers a PMSI (Purchase Money Security Interest) over the trucks on the PPSR. 
  1. Liquid Logistics have also leased several forklifts from Foolish Forklift. The forklifts have been leased for over five years on a lease that is automatically rolled over. Foolish Forklift are in the business of leasing, but do not register any interest on the PPSR.  

Harsh economic conditions force Liquid Logistics into liquidation. Liquid Logistics (In Liquidation) has $325,000 in assets at the time of insolvency.  

The assets  

  • Trucks still in the possession of Liquid Logistics are valued at $175,000. 
  • The leased forklifts in Liquid Logistics’ possession are valued at $90,000. 
  • The remaining personal property is valued at $60,000.  

The claims of the creditors  

  • Best Bank is owed $230,000.  
  • Awesome Automobiles is owed $240,000. 
  • Foolish Forklift is owed $120,000. 

Which creditors gets what? 

  • Awesome Automobiles have a PMSI over the trucks, which gives them a super priority over Best Bank’s first in time general security interest specifically relating to the trucks. Awesome Automobiles have a right to repossess the remaining trucks and entitled to the funds ($175,000) it recovers in priority to other creditors. 
  • Best Bank’s general security interest entitles it to all remaining assets of Liquid Logistics. It recovers $150,000.  
  • Foolish Forklift held a PPS lease and did not register their interest on the PPSR and are therefore an unsecured creditor. Upon liquidation, their interest in the forklifts became vested in Liquid Logistics. They have no right to repossess the forklifts, which become the assets available to the Company and Best Bank’s security interest. The Liquidator is able to recover the forklifts for the benefit of Best Bank. Foolish Forklift makes no recoveries.  


  • A PMSI (usually) takes priority over all secured interests.  
  • Registration on the PPSR is crucial.  
  • Claims over personal property are highly complex. It is best to consult with a legal professional to ensure a claim is perfected, and thus enforceable. 

*This article should not be taken as legal advice or substituted for legal advice.